States Are Advancing Bills Designed to Lower Drug Costs with Importation Plans
Norm Thurston is a “free-market guy”—a conservative health economist in Republican-run Utah who rarely sees the government’s involvement in anything as beneficial.
But in a twist, the state lawmaker is now pushing for Utah to flex its muscle to spur federal action on ever-climbing prescription drug prices.
“This is something that a red state like Utah could do. I don’t think this is a partisan issue,” Thurston said. “Those outrageous cost increases are not the result of the free market.”
The approach: Let the state contract with wholesalers in Canada, importing cheaper prescriptions from up north and distributing them to the state’s health care system.
Other states—Vermont, West Virginia and Oklahoma, among them—are following similar paths, pushing legislation that would seek permission from the Trump administration to launch their own plans to import drugs from Canada.
For years, American consumers have tried to buy cheaper drugs from their northern neighbor, sometimes packing into buses for day trips to Canadian pharmacies, or patronizing American stores that help them order drugs from abroad. But the practice is illegal.
The states want to change that, and set up a formal process that nets broader savings. The idea is for the state health department to set up a wholesale program that buys drugs from Canada and resells them to local pharmacies and hospitals. Individual states would be responsible for ensuring that the medications are safe and that importing them does save money.
“This statute is putting pressure on the federal government to take a harder look at these questions,” said Rachel Sachs, an associate law professor at Washington University of St. Louis, who researches drug price regulations. “The state legislatures can say, ‘Look, we’re doing everything we can, but we do need the federal government to help us out on this.’”
The federal government has been slow to act on this issue, and skeptics say a 30-page Trump administration memo on drug pricing released late last week would likely have only limited impact.
But states, whose budgets for Medicaid and state employee health programs are squeezed by these costs, are moving forward.
In Vermont alone, drug spending has gone up by 35 percent from 2010 to 2015, the most recent year for which data are available.
Backers of the state plans say the strategy is a no-brainer that could save hundreds of millions of dollars. They discount concerns about drug safety, arguing that drugs from Canada are made by reputable companies, often in the same facilities and by the same firms that sell them in the U.S.—but at much higher prices.
“We would be bringing in drugs intended for the Canadian market, and therefore at Canadian pricing,” Thurston said. “One would assume if we could come up with a program that meets the recommendations of federal law, what justification would the [Health and Human Services] secretary have for saying no?”
The state measures follow model legislation developed by the National Academy for State Health Policy that uses a framework put in place by the 2003 federal law that created the Medicare Part D program. That law says the U.S. Department of Health and Human Services can approve drug importation plans if it is convinced the plans will save money and will not create any public health concerns.
Once passed, these laws task state health departments with overseeing the development of these programs. After the health department settles on the specifics, state officials must negotiate implementation with HHS. That could take years.
It is also likely to be an uphill battle.
In 15 years, HHS has never acted upon the 2003 law by approving any drug importation program.
Last spring, when members of Congress pushed a national bill, a bipartisan group of former Food and Drug Administration commissioners came out in opposition, arguing it would be impossible to verify drug safety absolutely. That bill ultimately failed to garner a majority vote.
It’s unclear where the current administration stands on this issue.
Alex Azar, the newly confirmed HHS secretary, has been coy on the subject—though in a confirmation hearing last fall, he said importing drugs from Canada could create safety concerns. Despite multiple requests, HHS did not provide comment for this story by the publication deadline.
The pharmaceutical industry echoed the cautions about safety.
“The proposals we are seeing in states across the country threaten the safety of patients and families and will not deliver the savings they promise,” said Priscilla VanderVeer, a spokeswoman for the trade group Pharmaceutical Research and Manufacturers of America (PhRMA).
In the states, though, backers say their bills address that concern.
And other analysts argued that, regardless, safety of Canadian drugs isn’t a real issue.
“A lot of the drugs used in the United States and in Canada are made in the same plants, in countries like India or Europe,” said Michael Law, a pharmaceutical policy expert and associate professor at the University of British Columbia’s Center for Health Services and Policy Research. “The U.S. FDA and other regulatory agencies rely on other agencies’ inspections—the idea that Canadian drugs are these dangerous drugs is a red herring.”
A bigger question, he said, is the amount of savings these bills would generate.
Thurston pointed to Utah state analyses that suggest the state could save $70 million in the private sector, and another $20 million to $30 million in state-funded insurance programs. If approved, he said, the state would target 15 to 20 drugs to import—insulin, for instance, because it is bought in large quantities, or expensive drugs that treat hepatitis C or HIV.
Others expressed skepticism.
For one thing, the true price of prescription drugs isn’t always clear. There’s the list price—and generally, those are much higher in the United States. But insurance plans often negotiate rebates, or discounts, from the drug company—meaning they can end up paying far less than what’s advertised. Those discounts aren’t public, making it much harder to compare prices between the two countries.
The drug industry would also likely employ strategies to counter importation.
Pharmaceutical companies, Law noted, stand to lose if American states are importing cheaper drugs. That could motivate them to tamp down how many prescriptions they sell in Canada, or find other ways to discourage Canadian wholesalers from participating.
“My guess is any Canadian distributor to engage in that would find their [medication] supply dwindle quickly, because the drug companies would stop supplying,” he said. “The supplier systems in the United States would probably find it hard to get a [Canadian drug] supply in the long term.”
That’s certainly a real concern, said Claire Ayer, a Vermont state senator and Democrat who chairs her legislature’s Health and Welfare Committee.
“We can’t tell drug companies or wholesalers what to do in Canada,” she added.
VanderVeer said PhRMA could not speculate on how individual drug companies may react to importation.
Still, these state efforts could spur the federal government to take action, Sachs suggested—even if it’s unclear how large an impact importation would have.
“Importation will not solve all the problems—and I don’t think states see it as such,” she said. “But it could be a useful way to put pressure on a federal government and White House that has thus far largely been inactive on this topic.”
KHN’s coverage of prescription drug development, costs and pricing is supported by the Laura and John Arnold Foundation.